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OECD Investment Policy Reviews: Indonesia 2010
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- Foreword
- Table of Contents
- Preface by Angus D.W. Martowardojo
- Preface by Angel Gurria
- List of Abbreviations
- Executive Summary
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Overview of Progress and Policy Challenges
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Chapter 1.
Investment Policies and Trends Over Time
- + 1. The setting: economic reform
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2. FDI trends
- Figure 1.2. FDI inflows in Indonesia
- Figure 1.3. Recent FDI inflows into Indonesia
- + Box 1.1. Reporting FDI statistics in Indonesia
- + FDI flows fell sharply after the Asian financial crisis
- + FDI has been a relatively small source of capital in Indonesia
- + The origin of direct investment in Indonesia
- + Most foreign investors locate in Java and Sumatra
- + The sectors favoured by foreign investors have changed over time
- FDI has created jobs, particularly in the manufacturing sector
- + Foreign direct investment has contributed to Indonesia’s exports
- FDI has generated productivity spillovers to domestic industries
- Notes
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Chapter 2.
Investment Policy
- Box 2.1. The Policy Framework for Investment
- + 1. Laws and regulations
- + 2. Effective land ownership registration
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3. Intellectual property rights
- + Indonesia is a signatory to many international treaties and conventions covering IPR
- Indonesia has enacted and updated a number of IPR-related laws to meet international standards
- The government is also facilitating the process of applying for IPR protection
- Efforts are being made to meet the IP needs of SMEs
- Legislation has been complemented by efforts to improve enforcement
- But IPR enforcement remains a challenge for the government
- Further efforts are being made to raise public awareness and build institutional capacity
- Foreign firms also complain about a local production requirement
- + 4. Contract enforcement and dispute resolution
- 5. Expropriation procedures
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6. The non-discrimination principle
- National treatment is enshrined in law and most remaining restrictions pertain to foreign equity shares
- The Negative List has added to transparency
- The basis for establishing the Negative List is being streamlined
- … and weaknesses in the present structure are currently being addressed
- New rules covering foreign investment in the mining sector have been developed
- 7. Investment promotion and protection agreements
- 8. International arbitration instruments
- Notes
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Chapter 3. Investment Promotion and Facilitation
- + 1. Investment promotion strategy
- + 2. Investment promotion agencies
- + 3. Monitoring IPA performance
- + 4. Streamlining administrative procedures
- 5. Dialogue with investors
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6. Investment incentives
- Indonesia has a long history of offering investment incentives
- The Investment Law clarified the types of investment facilities
- The government has also pursued zone-based investment promotion in parallel
- The Law on Special Economic Zones was enacted to accelerate investment
- A mechanism to evaluate investment incentives is being put in place
- + 7. Promotion of investment linkages
- 8. Drawing on international expertise
- Notes
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Chapter 4. Competition Policy
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1. Transparency and non-discrimination
- The government’s regulatory framework did not support a competition culture in the 1990s
- The Competition Law was enacted in 1999
- Abuse of dominant position and other related provisions in the Competition Law
- Specific regulations on M&A review have not been issued
- The Competition Law allows several exemptions
- Transparent procedures for competition law enforcement are set in regulations
- KPPU actively communicates with investors to increase compliance with the law
- KPPU conducts awareness-raising campaigns for a wide range of stakeholders
- + 2. Implementation of competition laws
- + 3. Anti-competitive practices
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4. Policy evaluation and intra-governmental communication
- 5. Industrial policies
- 6. Competition aspects of privatisations
- + 7. International co-operation
- Notes
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1. Transparency and non-discrimination
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Chapter 5. Infrastructure Development
- + Infrastructure spending by the private sector collapsed in the wake of the Asian financial crisis
- Public spending has not filled the gap left by the disappearance of PPPs
- As a result, Indonesia lags behind its peers in terms of infrastructure
- + Increasing infrastructure spending and sectoral reforms are a national priority
- 1. Setting infrastructure policy
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2. A framework for private participation
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3. Telecommunications
- + Indonesia still lags behind peers in ASEAN in both fixed and mobile telephony
- The role of the state has been reduced slowly over time
- … but the degree of competition is still insufficient
- … and the rules of the game keep changing
- The telecommunications regulator needs to be given greater autonomy
- The government has imposed USOs on private operators
- + 4. Electricity
- + 5. Transport
- 6. Water
- Notes
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Chapter 6. Financial Sector Development
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1. Financial sector regulation
- State-owned banks have a dominant position in Indonesia’s financial sector
- Deregulation of the banking sector started in the mid-1980s
- The Asian crisis triggered a major restructuring of the banking sector
- Banks have become more robust against shocks but have been slow to lend for investment
- The stability of the financial system is a shared responsibility of BI, MOF and LPS
- + Indonesia’s financial sector has been open for foreign investors for over 20 years
- + Development of the capital market is encouraged by Bapepam-LK
- The insurance and pension sectors have not yet developed to channel long-term finance
- The domestic financial market needs to be made more attractive
- + 2. Bankruptcy proceedings, collateral use and credit information
- Notes
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1. Financial sector regulation
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Chapter 7. Public Governance
- + 1. Regulatory reform framework
- + 2. Co-ordination across government
- + 3. Regulatory impact assessments
- 4. Public consultation
- 5. Removing red tape
- + 6. International anti-corruption and integrity standards
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7. Enforcing anti-corruption laws and regulations
- The Corruption Eradication Commission is the main anti-corruption agency
- The Corruption Court has gained credibility in handling cases
- Other institutions have also been established
- KPK must share responsibility for preventing corruption with other agencies…
- … and co-ordination among these agencies has been a challenge
- Civil society groups and the media have been active in criticising corruption in the public sector
- An Agency for Witness and Victims Protection has been established to protect whistleblowers
- Public procurement system has been reformed to eliminate bribe payments
- + 8. Reviewing the effectiveness of anti-corruption laws
- + 9. International anti-corruption initiatives
- Notes
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Chapter 8.
Other Aspects of the Policy Framework for Investment
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1. Trade policy
- The government has reduced constraints on trade and streamlined border procedures
- The government has reduced trade policy uncertainty
- Indonesia pursues a triple-track strategy in its trade diplomacy
- Trade policies – like other policies – are subject to stakeholder consultation
- An Export Guarantee Agency has been set up
- + 2. Tax policy
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3. Corporate governance
- + Indonesia has made progress in establishing a corporate governance framework
- The 2007 Company Law enshrines principles of Good Corporate Governance
- Corporate governance guidelines were first published in 2001
- GCG certification of directors and commissioners is available, but not yet compulsory
- Sanctions to enforce GCG regulations are currently only available in the financial sector
- The 2007 Company Law is designed to ensure a level playing field for shareholders
- Legal redress is available for shareholders if their rights are violated
- Regulations for disclosure have been promulgated
- The Board of Directors of a company is advised by a Board of Commissioners
- The World Bank has assessed Indonesia’s corporate governance framework
- State-owned enterprises are included in Indonesia’s corporate governance framework
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4. Policies for promoting responsible business conduct
- The legal framework for human rights protection has been strengthened since 1998
- More players are active in enforcing human rights in Indonesia but improvements are still needed
- + Stronger environmental protection has recently been legislated
- Enforcement of environmental standards at local level faces challenges
- Labour union rights are improving
- The Manpower Law consolidated labour regulations and strengthened labour protection
- + Legislative reforms to protect labour rights continue
- Indonesia has enshrined RBC principles in legislation
- SOEs are obliged to contribute towards SME and community development
- Enterprises also voluntarily promote RBC in Indonesia
- Awareness of RBC standards and principles is increasing among enterprises and communities
- Disclosure is mandatory for both limited liability and public companies
- Disclosure is still relatively weak in Indonesia
- Reputational programmes reward compliance with environmental laws and standards
- The business case for RBC can become stronger in a democratic society
- Notes
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1. Trade policy
- + Annex A. Statistics
- Annex B. Recent Intellectual Property Related Regulations
- Annex C. Sectors where Foreign Investors Face Specific Restrictions (adapted from the Negative List as set out in Presidential Regulation 36/2010)
- Annex D. Bilateral Investment Treaties Signed by Indonesia
- Annex E . Bilateral Tax Treaties Concluded
- Annex F. International Conventions Ratified by Indonesia
- Bibliography
Indonesia has undertaken a decade of political and economic reform, under very difficult circumstances. Democracy is now firmly established, and the economy is growing at a steady pace in spite of the global financial crisis. Reforms over the past decade have done much to improve the resilience of the Indonesian economy, and the government has made substantial progress in creating a better climate for investment. New laws have been enacted in almost all sectors, and new institutions have been created to advise the government, implement and enforce laws, regulate newly liberalised sectors and settle disputes. Foreign investors have taken notice. Foreign direct investment in Indonesia in the past five years has exceeded the earlier peak achieved in 1996, before the Asian financial crisis in 1997-98 brought economic contraction and net outflows of foreign investment. This investment is also becoming increasingly diversified by sector and by country of investor. OECD Investment Policy Reviews: Indonesia charts Indonesia’s progress in developing an effective policy framework to promote investment for development. It focuses on policies towards investment, competition, infrastructure, finance and other areas of the business environment and suggests ways the climate for both domestic and foreign investment might be further improved. In the same seriesChinaEgyptIndiaMoroccoPeruRussian FederationViet Nam.
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Business & Economics > Commercial Policy
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Publication year : 2010
License: All rights reserved ©
Times read: 398
